Saturday, August 17, 2013

On Raising the Minimum Wage

So, the argument goes something like this:  If you raise minimum wage, corporations will pay for that cost by raising prices, thereby increasing inflation, and we'll all be poorer for it as everything gets more expensive.  The problem isn't wages, but inflation. Therefore, we should not increase minimum wage.

It follows, that it's necessary that some people work full time yet live well below the poverty line because otherwise, if we raise their wages, they'll end up even poorer because everything will costs so much more - right?  So, we're actually helping people by maintaining a lower wage for them and letting them choose between heat or food.  We're awesome! 

I don't buy it.

Check out the video Lorne has up at Politics and its Discontents.  It's worth it to watch the whole thing.

The counter-argument:  If we raise minimum wage in corporations that are profiting, they will see a slight reduction in profits, and the CEOs will take home a little less. Raising prices is NOT a necessary result of raising wages.  Yes, that's right.  I think the company should eat the loss, and a recent Business Insider article agrees. The video shows that in States that raised the minimum wage, "Across the board rigorous research makes it very clear that business have been able to afford the wage increases."

AND, the increase in wages stimulates more spending from a shitload of people who can now actually afford a luxury or two.  Maybe even a hamburger.  So, overall, the increase in spending counters loss from actually paying people a respectable, living wage.   It's not a matter that nice corporations ate the loss for the good of society, but that corporations didn't experience a loss.  They can maintain profits by increasing the number of people who can buy their stuff.  

I always go back to Rawl's veil of ignorance assignment on issues like this:  If I were to create a society in which I didn't know which position I'd end up in, would I maintain that some people can be paid less that is enough to survive?  Because that could be me.  And, in real life, right now, if something happened to me, it could be my kids.  Full time workers shouldn't have to live in poverty - especially not so others can maintain their standards of excess.   


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Jim said...

I don't know whose nonsensical argument you are citing. Minimum wages are harmful, but they don't cause inflation. They may raise the price of some goods, but they're not a driver of net inflation. A minimum wage that is above natural wages will simply price low-skilled workers out of the labor market. If the minimum wage is $10, business aren't going to hire anyone who is worth less than $10. It really is that simple. If you were required to spend at least $40,000 on your next car and you had the money, would you buy a Chevy Cobalt or a Lexus? You'd buy a Lexus. The Chevy Cobalt is the high school dropout with no skills. It's not worth what you're being asked to pay for it.

I actually just posted on the same subject:

Marie Snyder said...

Hi Jim,
But employers will hire the best person regardless the wage. Even if it's $6/hour, if they can get choose between someone with high school, and data entry experience or a high school dropout, they'll always pick the one with more experience and education. It's not the case that a lower minimum wage means unskilled workers will all be working, and people with some basic skills will be unemployed. Nobody will choose the lowest skilled person for the job just because it's for a lower wage.